The Obama administration's latest plan to help banks get credit flowing again is drawing a tepid reaction from investors and academics, who say the proposal comes with too many strings attached and might not stimulate lending.

And even if banks are willing to start lending more money, they wonder if many people will be able to take on more credit until the economy gets going again.

"We went on a borrowing binge," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "Debt levels, especially in households, are too high or unmanageable."

The plan Treasury Secretary Timothy Geithner intends to announce today aims to create a new government entity — the Public Investment Corp. — to help buy up to $1 trillion in toxic assets on banks' books.

The initiative will seek to entice private investors, including big hedge funds, to participate. It will do so by offering billions of dollars in low-interest loans to finance the purchases and by sharing risks if assets fall further in value.

Analysts agree that stabilizing the banking system is crucial. But some wonder whether the proposal will create more problems.

"It's quite possible we could make bad banks out of good banks," Sung Won Sohn, professor of economic and finance at the Smith School at California State University, said Sunday.

Sohn wonders whether the sale of assets at bargain prices, to remove them from banks' balance sheets, would then force other banks to have to write down the value of similar assets they might not want to sell.

Meanwhile, in trying to encourage lending, the government must take great care to avoid distorting incentives, said Robert Webb, a finance professor at the University of Virginia.

"Do you want to lend to bad creditors in a bad economic environment?" he asked.